Articles

New Light on Supporting Statements

On 30 April 2018, the Supreme Court of New South Wales handed down its decision in the case of Central Projects Pty Ltd v Davidson [2018] NSWSC 523.

The case concerned an application made by Central Projects Pty Ltd (CP) seeking judgment against Mr Stephen Davidson in the sum of $1,224,354.06 (plus interest and costs) on the basis that Mr Davidson did not serve a payment schedule in response to CP’s payment claim by the time required under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).

Mr Davidson argued that the payment claim served by CP was not validly and effectively served given that it was not accompanied by a supporting statement which met the requirements of the Act.

The Court provided some interesting commentary on whether a supporting statement is required for the purposes of a payment claim being validly served by a head contractor.

WHAT THE CASE IS ABOUT

In summary:

On 24 November 2015, CP entered into a contract with Mr Davidson in relation to demolition and excavation works for a mixed-use development in Bondi;

On 5 January 2018, CP served a progress claim under the Act (Payment Claim);

The Payment Claim was accompanied by various invoices and in particular a document which purported to be a supporting statement under the Act;

Mr Davidson did not serve a payment schedule in accordance with the requirements of the Act;

On 26 February 2018, CP filed a summons with the Court seeking judgment against Mr Davidson in the sum of $1,224,354.06 (plus interest and costs);

The main argument raised by Mr Davidson in the case was that the supporting statement which accompanied the Payment Claim was not a supporting statement within the meaning of section 13(9) of the Act – this was on the basis that the supporting statement did not list a number of entities who supplied goods to CP during the period covered by the Payment Claim; and

Mr Dimitri Patete (the sole director of CP) gave evidence that those entities were not listed in the supporting statement because he was of the belief that persons who had merely supplied goods did not fall within the definition of subcontractor and were therefore not required to be listed in the supporting statement.

THE COURT’S DECISION

The Supreme Court determined that the supporting statement was a valid supporting statement for the purposes of the Act and that the Payment Claim was therefore validly served. This was because:

The document was substantially in the form prescribed by the regulations;

The omitted subcontractors were included in the PC Allowance Register which was served as part of the Payment Claim – this meant that the principal or “authorised officer” under the Act could investigate the accuracy of information contained in the supporting statement; and

If Mr Davidson was correct in his submission, the effect would be that an inadvertent failure to identify all subcontractors in the supporting statement would deprive a head contractor of the benefits of the Act.

COMMENTARY BY THE COURT

Interestingly, Ball J stated that if there were no authority on the point (referencing McDougall J’s decision in Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 which has been followed by other more recent cases) and if he was required to consider the issue, then he would have concluded that the failure to serve a supporting statement did not render the Payment Claim invalid.

The primary reason was because section 13(7) of the Act makes it an offence for a head contractor to serve a payment claim without a supporting statement and it could not have been the intent of legislature that contravening this section would have any other consequence (i.e. the additional consequence that a payment claim was invalidly served).

WHAT TO TAKE AWAY

The position for around the last three and a half years has been that the absence of a supporting statement was fatal for a head contractor, given that the consequence of this was that an adjudicator did not have jurisdiction to determine an adjudication application because that payment claim was invalidly served.

Despite the Court’s comments, the best practice is still for a head contractor to serve a supporting statement compliant with the Act with any payment claim so as to limit any argument on this point.

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.